News that German industrialist Ernst von Freyberg will take over as the new head of a financial body called the Institute for Works of Religion made a splash recently in the world's media.

Under normal circumstances, the attention might seem misplaced. After all, the Institute for Works of Religion, known by its Italian acronym IOR, is a relatively small financial body with just 33,000 accounts and only $7.6 billion in assets — less than some Canadian credit unions. 

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This 15th-century building in the Vatican houses the Vatican Bank, formally known as the Institute for Works of Religion. (Domenico Stinellis/Associated Press)

But the IOR is no ordinary financial institution. It is better known by its unofficial name — the Vatican Bank. 

Von Freyberg's appointment to the top job came as the beleaguered institution struggles to regain credibility after decades of financial scandals that have seen the secretive institution being probed more than once for alleged money-laundering and other questionable financial matters.

Most recently, it has been trying to address findings that its banking standards — especially in the transparency department — aren't up to the job.

Bitter infighting

So bitter has been the infighting that internal critics say they have been shuffled out in a bid to silence them and shield the bank's inner workings from prying eyes.

Von Freyberg’s appointment fills the void left by the ousting of the bank’s previous head, Ettore Gotti Tedeschi. The bank’s board of directors fired him last year for failure to carry out "the primary functions of his office," according to a Vatican statement.

The stories vary wildly. Tedeschi's critics say he was an erratic, negligent manager who alienated staff and blocked efforts at reform. But his supporters, and Tedeschi himself, say he was fired because of his efforts to lift the bank's veil of secrecy.

Regardless of where the truth lies, his sudden departure undoubtedly came as a disappointment to Pope Benedict, who had approved his appointment to the job in 2009 with a mandate to bring in a new age of transparency.

Vatican Bank: By the Numbers 

1942: Year the Vatican Bank was founded

5: Number of cardinals who sit on a commission that oversees the bank

$7.6 billion: Assets under administration

33,000: Number of accounts

13: Number of ATMs the bank has in the Vatican

Sources: AP, CNS, The Economist 

Church observers say all the scandals and the power struggles at the bank may even have played a part in the Pope's historic decision to step down.

"It is very clear that Benedict suffered a lot from the revelations of scandal, from the infighting and intrigue at the Vatican Bank," veteran Catholic News Service correspondent John Thavis told the Washington Post this month. "Did that affect the Pope's decision? A lot of people inside the Vatican think it did." 

There's no question that Italian and European authorities are upping the pressure on the Holy See to force the Vatican Bank to comply with international money-laundering regulations.

Last month, Italy ordered its own banks not to do business in the Vatican, saying it lacked adequate oversight and meaningful anti-money-laundering controls. The decision briefly led to a suspension of debit and credit card processing at the Vatican's busy museums.

Banco Ambrosiano

The murky nature of the bank's practices is not a new issue. Back in 1982, the Vatican Bank faced its most serious crisis, courtesy of an incident that could have been ripped from the pages of The Da Vinci Code

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This 1981 file picture shows Italian financier Roberto Calvi. A financial adviser to the Vatican, Calvi headed the Banco Ambrosiano, which collapsed in one of Italy's largest fraud cases. (Associated Press)

Roberto Calvi, known as "God's Banker," was found dead, hanging from Blackfriars Bridge in London, the victim of what was first ruled a suicide. But following an investigation, murder charges were laid against five people, including a major Mafia figure. All were acquitted.

Calvi was the chairman of the Vatican-affiliated Banco Ambrosiano, which collapsed after the disappearance of $1.3 billion in loans made to dummy companies owned by the Vatican Bank in Latin America. The Vatican had provided the letters of credit that enabled the fraud. The Vatican Bank settled with Ambrosiano's account holders to the tune of $250 million.

One of the more recent incidents came to light in 2010. Italian authorities questioned the origin of an unusually large amount of Vatican Bank funds — $30 million — in Italian banks.

They seized the money as part of an investigation into allegations that the Vatican Bank had broken anti-money-laundering laws. The bank denied it had done anything wrong and the funds were eventually released.

Vatileaks

The release last year of leaked documents — the so-called Vatileaks affair — shone more unwelcome light on the Holy See's financial matters. They showed, for instance, tens of millions of dollars in transfers to American dioceses to help them pay legal settlements relating to the abuse of children by priests.

Other documents included letters from a senior Vatican official, Archbishop Carlo Maria Vigano, in which he complained of widespread money-laundering, corruption and cronyism in the Vatican.

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People entering the Vatican Museums in January 2013 had to pay cash only for tickets, souvenirs and other services after Italy's central bank decided to block electronic payments, including credit cards. (Alessandra Tarantino/Associated Press)

The journalist who received the leaked documents told Der Spiegel that he believes they ultimately show that Pope Benedict was determined to clean up the Vatican Bank and subject it to more financial scrutiny.

For the record, the Vatican says it is determined to restore its bank's financial reputation. Key Vatican insiders know that the bank's global activities, built-in secrecy and frequent cash transactions make it an attractive target for those seeking to hide ill-gotten funds.

It wants to join the OECD's so-called "white list" of jurisdictions that comply with international standards of financial transparency.

"We are trying to open the treasure chest up a bit and show we are working for transparency," bank director general Paolo Cipriani said last year. 

The body that monitors money-laundering and terrorism financing in Europe says the Vatican Bank is indeed more transparent now than it was. But it says more needs to be done — including the establishment of independent supervision.

It remains to be seen how far the Vatican will pull back the drapes. Some Vatican power-brokers have strongly resisted external interference before, clearly believing that its modest bank should ultimately answer to only one higher authority.

With files from The Associated Press